May 6, 2022

A summary of the crypto market in 2021, Could 2022 be the year crypto goes mainstream, five ways derivatives could change the cryptocurrency sector

A year of up and downs, but mostly ups

In the Arcane Research report, they cover an eventful reflection of crypto in 2021.

Bitcoin was adopted as legal tender in El Salvador, and several public companies added bitcoin to their balance sheets. On the institutional side, open interest boomed on CME, and several bitcoin ETFs saw the light of day. Additionally, we saw numerous Tier 1 investment banks begin offering bitcoin and crypto-related services such as custody and trading. However, the year was not all filled with bullish news. Once again, China delivered bad news as they enforced a strict mining ban, leading the hashrate to temporarily plummet in bitcoin before returning to its pre-China ban levels six months later. 2021 saw bitcoin pushing towards new highs, reaching a new all-time high in November of $69,000.

Could this be the year crypto finally goes mainstream?

The Financial Post takes a look at some of the biggest issues Canadians have about business and investing in 2022 in their latest Burning Questions series.

The crypto space has come a long way in 2021, as record-breaking price rallies, more new ground broken in the non-fungible token (NFT) space and the metaverse, and further innovations on the blockchain network drive the industry’s growth.

But all this growth and the accompanying hype raise questions about how crypto can continue to put its stamp on the financial space and whether 2022 will be the year it finally goes mainstream.

Some analysts, such as Bloomberg’s senior commodity strategist Mike McGlone, expect wider adoption for bitcoin and Ethereum, helping them overcome “wobbles” such as the near 50-per-cent correction in some cryptocurrencies in 2021.

A lower price point might help entice more people to enter, but even seemingly bad news, like China cracking down on cryptocurrencies earlier in the year, could be a boon for mainstream adoption as crypto interests move out of China and into the United States.

5 ways derivatives could change the cryptocurrency sector in 2022 

Retail and institutional investors love derivatives instruments. Here‘s how they could impact crypto markets in 2022.

We‘ve all heard stories of billion-dollar future contracts liquidations being the cause of 25% intraday price crashes in Bitcoin (BTC) and Ether (ETH) but the truth is, the industry has been plagued by 100x leverage instruments since BitMEX launched its perpetual futures contract in May 2016.

The derivatives industry goes far beyond these retail-driven instruments, as institutional clients, mutual funds, market makers and professional traders can benefit from using the instrument‘s hedging capabilities.

In April 2020, Renaissance Technologies, a $130 billion hedge fund, received the green light to invest in Bitcoin futures markets using instruments listed at the CME. These trading mammoths are nothing like retail crypto traders, instead they focus on arbitrage and non-directional risk exposure.